What’ll Happen to Home Prices in Silicon Valley & San Francisco after the Mega-IPOs? Last Two Times, We Got a Housing Bust
What’ll Happen to Home Prices in Silicon Valley & San Francisco after the Mega-IPOs? Last Two Times, We Got a Housing Bust by Wolf Richter for Wolf Street
Here’s how it works. Meanwhile, the media is busy publishing real-estate industry hype.
This is a shorter, less angry version of my podcast last Sunday (as many have found out, I’m freer when I talk than when I write).
It’s now a standard theme in San Francisco and Silicon Valley conversations, and it’s everywhere in the media: The wave of mega IPOs – including Lyft’s IPO last month and the forthcoming IPOs of Uber, AirBnb, Palantir, etc. – will cause the Bay Area to drown in millionaires that are all going to move out of their rinky-dink apartments and buy homes and cause the housing market that has been sinking since spring last year to make a violent U-turn and inflate a whole lot more. The entire real-estate industry is salivating and pushing this theme. But wait…
First, there’s history. The last two mega waves of IPOs were followed by, well, not further home price increases but housing busts.
The IPO boom in 1999 and early 2000 led to the same kinds of speculations that these newly minted millionaires in Silicon Valley and San Francisco would push up home prices. But then came the bust, and these startups cratered and people lost their jobs and couldn’t afford to live in the Bay Area without a job, and they packed up and left. Some dumped their homes. Others defaulted on the mortgage and walked away because they could: California is one of only 12 “non-recourse” states. Housing units began to empty out. Home prices, instead of being further inflated by this mega-wave of IPOs, fell.
Similar hype about IPO moola further inflating an already inflated housing market, with the entire real estate industry salivating, occurred in 2006. In 2007, the local housing market started to crash.